Thursday 20th January 2011
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In anticipation of increased inflationary pressure Tower has been shifting its asset allocation away from fixed interest and into shares, said Tower Investments chief executive Sam Stubbs.
Speaking at Tower's inaugural quarterly briefing he said Tower was realigning its investments and "moving more into the growth side of things."
Stubbs also said inflation was one of three ways to resolve debt problems.
"You can grow your way out of it; restructure your way out of it or inflate your way out of it. We think that this year there will be a combination of debt restructuring and inflation," he said.
"We think the majority of central banks will be quite happy for inflation to overshoot [targets] because it solves a lot of the problem of global indebtedness as long as it doesn't get out of control."
Other themes Stubbs said would dominate the investment world in 2011 included debt - as governments continue to borrow and print money as they are "committed to stimulus packages."
He said currency wars would also heat up as countries attempt to devalue their currencies as a way of boosting exports.
Corporate balance sheets are also looking healthy and Tower believes that cash will find its way into the markets over this year, with increased merger and acquisition activity and share buybacks also set to give shares a boost.
Tower was also positive on the prospects for the New Zealand economy this year, citing factors such as immigration growth, an increase in outsourcing from Australia and the possibility of a commodities boom.
"Right now, New Zealand is selling the things the world wants to buy," Stubbs said.
He said these factors added up to "a positive story for New Zealand Inc. and property prices."
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